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Manufacturing index drops to 28-year low

Manufacturing activity fell more than expected
in December, hitting the lowest reading in 28 years as new orders
and employment continue to decline.

The Institute for Supply Management, a trade group of purchasing
executives, said Friday its manufacturing index fell to 32.4 in
December from 36.2 in November. Wall Street economists surveyed by
Thomson Reuters had expected the reading to fall to 35.5.

Component readings of the index hit historic lows. New orders
fell to their lowest level on records going back to 1948. Prices
fell as the number of respondents saying they had paid more in
December than in November sank to its lowest monthly reading since
1949.

Any reading for the overall index above 50 signals growth, while
a reading below 50 indicates contraction. The index is based on
based on a survey of the institute's members, has fallen steadily
for the last five months as the economy deteriorated.

The index fell to its lowest level since June 1980, when the
economy was near the end of a six-month recession.

Investors shrugged off the grim report on the new year's first
day of trading, eager to start fresh after the losses of 2008.
Stocks were higher in late-morning trading, with the Dow Jones
industrial average up 98.05, at 8,874.44. Broader indexes were also
higher.

Only three recessions in the history of the index have showed
weaker manufacturing readings, said John Ryding, of RDQ Economics.
Those recessions were in 1948 to 1949, 1973 to 1975 and 1980.

With European manufacturing indexes also dropping, "the case
for a massive global fiscal stimulus continues to grow," Ryding
said.

As the economy sputters through a recession that began in
December 2007, no industry is proving resistant. No sector reported
overall growth in December. Also, none reported growth in new
orders, production, employment or prices, as businesses from
tobacco to coal products to foodmakers saw declines.

The employment index showed its lowest reading since 1982. The
sector lost 85,000 jobs between October and November, according to
the most recent data from the Bureau of Labor Statistics. More
losses are expected in coming months as demand continues to be
weak.

The chemical industry, for instance, has been battered by both
the decline in demand and volatile commodity prices. LyondellBasell
Industries, the third-largest independent chemical company in the
world, said Wednesday that while several lenders had allowed it to
postpone $160 million in loan payments, a Chapter 11 bankruptcy
filing might still be an option.

The announcement came just two days after the collapse of a
$17.4 billion joint venture between Dow Chemical and Kuwait's
Petrochemical Industries Co.